{"id":44775,"date":"2013-08-26T23:18:55","date_gmt":"2013-08-26T21:18:55","guid":{"rendered":"http:\/\/businesstech.co.za\/news\/?p=44775"},"modified":"2013-08-27T08:51:58","modified_gmt":"2013-08-27T06:51:58","slug":"cell-c-cant-compete-on-price-alone-analyst","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/mobile\/44775\/cell-c-cant-compete-on-price-alone-analyst\/","title":{"rendered":"Cell C can’t compete on price alone: analyst"},"content":{"rendered":"

For Cell C<\/a>\u00a0to compete merely on the price alone will not ensure the group’s\u00a0survival – or do the rest of the industry any favours.<\/p>\n

This is according to\u00a0Ian Duvenage<\/a>, business unit leader for ICT at growth consulting firm, Frost & Sullivan<\/a>, who says the group will need wins on the\u00a0regulatory side in order to remain\u00a0an industry player.<\/p>\n

Paul Theron<\/a>, CEO of\u00a0Vestact Limited<\/a>, recently argued that Cell C\u00a0has decimated its own business case and will be dead by next year.<\/p>\n

He added that the operator is\u00a0hurting the mobile market in South Africa for everyone, including itself, with its aggressive pricing strategy.<\/p>\n

“Cell C has been struggling for the last few years. The change in leadership has had a positive influence on the market perception of the company. However, it does not seem to have had the impact they required in order to ensure the company is sustainable,”\u00a0Duvenage said.<\/p>\n

He noted the group’s recent cash injection of\u00a0R5.7 billion from\u00a0Oger Telecom<\/a>, the Lebanese-controlled firm with an indirect 75% holding in the SA operator,\u00a0which invested a further $350-million (around R3.5 billion) and key lenders including\u00a0Nedbank<\/a>\u00a0and the\u00a0Development Bank of South Africa<\/a>\u00a0which provided R2.2 billion.<\/p>\n

Duvenage pointed out that, while \u00a0Cell C has grown its market share to between\u00a013% and 14%, it has very little presence in the more profitable parts of the market.<\/p>\n

“The very aggressive marketing strategy around the low price might have been costly, and it could be argued that the low impact on marketshare over the period does not reflect the uptake they expected.”<\/p>\n

“The low-cost strategy from Cell C aimed to convert more clients to the network, with the quantity compensating for the low Arpu (average revenue per user)\u00a0also has not worked out to date,” Duvenage\u00a0said.<\/p>\n

“The reduction in price would directly influence the average revenue per user (Arpu) and; thus, the profitability of Cell C,” the analyst said.<\/p>\n

The operator announced at the end of July that it had signed up one million customers during the month, taking its subscriber base to 11.7 million.<\/p>\n

F&S said that Cell C’s price cuts had also prompted other operators in the market to respond with competitive offerings of their own.<\/p>\n

“One of the hindering factors of the network to date has been coverage, as well as quality of service, which is still a factor for them in the market,” the group added.<\/p>\n

Duvenage pointed out that Cell C has also been placing increased pressure on the\u00a0Independent Communications Authority of South Africa\u00a0\u00a0to introduce assymetric pricing, which would ultimately improve its profitability in the long term.<\/p>\n

“For Cell C to remain a player, and to remain sustainable in the market over the long term, they would require some wins on the regulatory side. To compete merely on the price front will not enable them to survive, or do the rest of the industry any favours,” Duvenage said.<\/p>\n

Other analysts however, believe that Cell C would not have\u00a0received\u00a0such a big cash injection\u00a0if it was such a ‘basket case’.<\/p>\n

More on Cell C<\/h3>\n

Why Cell C won\u2019t be dead in 6 months<\/strong><\/a><\/p>\n

Cell C dead by 2014: analyst<\/strong><\/a><\/p>\n

Cell C sign-ups boom\u00a0<\/a><\/strong><\/p>\n

Cell C seeks profitability within 3 years<\/strong><\/a><\/p>\n

Cell C: where the billions will go<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Cell C’s long term survival will not come from price cuts alone, argues an analyst, believing that it will need a few favours from Icasa.<\/p>\n","protected":false},"author":10,"featured_media":12396,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[34],"tags":[6028,59,26,1799,1186,5141,6523],"class_list":["post-44775","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mobile","tag-development-bank-of-south-africa","tag-frost-sullivan","tag-headline","tag-nedbank","tag-oger-telecom","tag-paul-theron","tag-vestact-limited"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/44775","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=44775"}],"version-history":[{"count":12,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/44775\/revisions"}],"predecessor-version":[{"id":44808,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/44775\/revisions\/44808"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/12396"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=44775"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=44775"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=44775"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}